Latest Stories

FASB Issues Health Care Proposals

FASB
on Friday issued two exposure drafts that would change accounting
for health care organizations. One proposal
would require that the measurement of charity care for disclosure
purposes by health care providers be based on the direct and
indirect costs of providing the charity care. The second proposal is aimed at how organizations account
for medical malpractice and similar liabilities and related
insurance payouts.

In Proposed Accounting Standards Update, Health Care
Entities (Topic 954): Measuring Charity Care for Disclosure (a
consensus of the FASB Emerging Issues Task Force), FASB says
that existing guidance does not dictate a specific
measurement basis of charity care for disclosure purposes. Some
entities determine their charity care disclosures on the basis of a
cost measurement, while others use a revenue measurement.

“The
proposed guidance would improve current GAAP by requiring all
entities to use the same measurement of charity care, thus enhancing
comparability,” the exposure draft says. “A health care entity does
not recognize revenue when charity care is provided; accordingly,
the amendments in this proposed Update would have no effect on the
amounts reported on the primary financial statements.”

Proposed
Accounting Standards Update, Health Care Entities (Topic 954),
Presentation of Insurance Claims and Related Insurance
Recoveries (a consensus of
the FASB Emerging Issues Task Force), would
clarify that a health care entity should not net insurance
recoveries against a related claim liability. The amount of the
claim liability would be determined without consideration of
insurance recoveries.

Most
health care entities have netted insurance recoveries against the
accrued liability, although some entities have presented the
anticipated insurance recovery and the liability on a gross basis,
according to the proposal. The proposed amendments are consistent
with guidance on netting receivables and payables in Subtopic
210-20, Balance Sheet—Offsetting, that are more broadly applicable
for entities in other industries. The proposed amendments would
improve current GAAP by clarifying that this guidance also applies
to health care entities and, therefore, reducing diversity in
practice, FASB says.